Manchester Capital Management is buying one of the Chicago developer's first revamp projects in the neighborhood, betting companies will keep wanting to work in vintage office buildings downtown.

Manchester Capital Management is buying one of the Chicago developer's first revamp projects in the neighborhood, betting companies will keep wanting to work in vintage office buildings downtown.

A West Coast investor is buying one of Sterling Bay's first revamp projects in the West Loop, betting that companies will keep wanting to work in loft office buildings downtown.

Manchester Capital Management has struck a deal to buy a majority interest in an eight-story brick-and-timber office building at 626 W. Jackson Blvd. for close to $19 million, according to sources familiar with the agreement.

The purchase price of around $300 per square foot would be high for a vintage office property, underscoring investor confidence in historic buildings that have been renovated and outifitted with modern amenities. Next door, the loft office building at 600 W. Jackson Blvd. sold in 2017 for around $220 per square foot.

The 99-year-old building Manchester is buying was the headquarters of the Chicago Housing Authority when Chicago-based Sterling Bay bought it for $7.8 million in 2008, according to real estate information company CoStar Group. After the CHA moved out, Sterling Bay renovated the building and sold off close to three full floors in 2009 to the nonprofit Cara Program and Dearborn Capital Management for a combined $8.5 million, according to CoStar.

Since then, Sterling Bay and a bevy of other developers have fixed up dozens of historic loft office buildings all around downtown and leased them up, cashing in on heightened tenant interest in such buildings. Demand for that type of space has jumped with the rise of Chicago's tech sector, where companies have shown an appetite for nontraditional space.

Now Sterling Bay is poised to cash out on its remaining 63,547-square-foot interest in the Jackson Boulevard building, having spent more than $7 million on renovations during its ownership tenure, according to a flyer from brokerage CBRE, which marketed the property for Sterling Bay. The entire 626 W. Jackson Blvd. building is 107,977 square feet, according to CoStar.

The controlling interest in the building would be Manchester's first Chicago purchase. The firm advises family office investors and has primarily bought office buildings on the West Coast, including several in Seattle and Portland, Ore., according to research firm Real Capital Analytics.

Montecito, Calif.-based Manchester is buying office space in a pocket of the West Loop that has recently gained momentum with the nearby redevelopment of the Old Main Post Office into a modern office building and another developer planning a 1.5 million-square-foot skyscraper at Union Station anchored by BMO Harris Bank.

Immediately north of the offices Manchester will soon own, Lincolnshire-based technology products company CDW is slated to lease the majority of a new 20-story office building at 625 W. Adams St. that opened last year.

The portion of the building Manchester is buying is fully leased by six tenants, led by design firm IDEO, with 20,442 square feet, according to the CBRE flyer. That lease expires in June, according to CoStar, posing an imminent challenge to Manchester.

But IDEO's rent is 14 percent below market rate, according to CBRE, which could give the new landlord a chance to boost the building's bottom line.

Sterling Bay's building was appraised at $11.9 million in 2013, when the developer refinanced it with a $8.6 million loan. The building's net operating income through the first nine months of 2018 was nearly $1.2 million, according to a Bloomberg report tied to that loan, which was packaged with other commercial loans and sold to investors.

A Sterling Bay spokeswoman confirmed the property was under contract but declined to comment on details of the deal. A Manchester spokesman couldn't be reached.

Chicago brokers Cody Hundertmark and Tom Sitz, formerly of the Chicago office of brokerage CBRE, are representing Sterling Bay in the sale.